The Relative Strength Index (RSI)

by CI Staff

In this issue’s Feature article, we discuss using relative strength analysis to pick exchange-traded funds (ETFs). This is just one example of a relative strength indicator.

Another relative strength measure, the relative strength index (RSI), was developed by J. Welles Wilder in 1978. This widely used momentum indicator is called an oscillator because it moves, or oscillates, between two fixed values based on the price movement of the underlying security or index. However, the RSI is an internal measure of price strength and does not compare price action to an index or other security.

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Discussion

Rajinder from NY posted over 3 years ago:

I loved this article and strategy. I plan to use it by starting with a experimental portfolio worth $100K. Then I will see where to go with real money.
Thanks keep it going.

Thomas from IL posted over 3 years ago:

Thank you.

Jim from Oregon posted over 3 years ago:

This article does not demonstrate if this technical indicator works. The excellent book Evidence Based Technical Analysis by Dave Aronson did statistical studies on hundreds of technical indicators, including the RSI. He did not find any evidence it worked. It might be useful in coordination with other technical indicators when part of a complete and disciplined trading strategy, but not by itself.

Allan Pacela from CA posted about 1 year ago:

I have found the Stochastic Oscillator to be the best indicator of turning points in stock prices.
However, I use it in conjunction with Relative Strength. If you set up a price chart with these two indicators, then study just a few of your stocks of interest over the past year, you begin to see some buy and sell signals. Of course, nothing is certain in life or investing.
Stochastic Oscillator: "A technical momentum indicator that compares a security's closing price to its price range over a given time period. The oscillator's sensitivity to market movements can be reduced by adjusting the time period or by taking a moving average of the result."